Strategic Problems At United Parcel Service
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Published: Wed, 10 May 2017
Founded in 1907 as a messenger company in the United States, UPS has developed into a multi-billion-dollar company by clearly focusing on the goal of enabling commerce around the globe. Today, UPS is a global company with one of the most renowned and accepted brands in the world. We have become the world’s largest package delivery company and a most important global supplier of specialized carrying and logistics services. Every day, it manages the flow of goods, funds, and information in more than 200 countries and territories worldwide.
Strategic Problems at United Parcel Service:
UPS faced a diversity of problems in the future. UPS had to consider about how to develop and grow its information and technology system, in order to continue competitive in the marketplace. With that dispute, UPS had to face the challenge of matching its intent to promote and expand from within, with require to go ahead rapidly using outside resources. Along a related element, UPS struggled with the strategic difficulty of how to grow up their air services business. UPS has to think whether or not to continue astringent air services from other suppliers, or to obtain another firm. Acquiring another firm would cause UPS to deal with even more problems with cultural incorporation. Overall, UPS was dealing with the strategic problem of similar require for cultural integration and require for quick development. Neither factor could be unobserved if UPS wanted to remain a strong candidate in the market.
Opportunities at United Parcel Service:
By increasing customer’s hope of higher quality products, UPS has the possible to expand in a split Asian market. They first penetrate the market by partnering with a key business player in the market with a focus on exports, imports. After this, they will follow acquisitions and more of a household play. UPS leverages its network by providing logistics solutions for retail and developed companies. This growing business had been increasing double digits pre-recession and in 2009 these revenues decreased by 20%. While DHL, who had priced down the market, left the U.S. parcel market more than two years ago, we consider that full pricing power was partially postponed since transporter contracts are usually 1-3 years. Therefore, UPS could be increasing profit margin by having more price control. Increase in B-to-B growth will help make bigger operating margins due to economies of scale. New services are being added in the U.S., Asia, Europe, and Canada to accommodate speedy growth in healthcare.
UPS Potential problems involved in implementing action:
The amount of operating influence UPS has could reverse any positive trends. Recent efforts to increase yields could be damaged if there is softer demand as package volumes and a move to lower yielding services would apply force to both margins and yields. UPS may find it difficult to significantly cut costs because of the width of its network if there is another downturn. The transportation industry is subject to cyclical factors, including economic condition, customer’s business conditions, credit markets, and seasonal patterns, which may harmfully affect customer shipping volumes and industry cargo demand. With approximately 25% of UPS’s revenue as international, with more focus on Europe, E.U credit issues could hinder UPS’s international development plans. UPS’s model is labor concentrated with compensation accounting for 60% of operating expenses. Also, almost 60% of UPS workers are unionized through teamster and the current contract expires in 2013. The last union-organized strike was in 1998. Higher prices joined with lower demand would impact the margins negatively as consumers may look for lower-cost but slower parcel delivery methods.
The approach to the Strategic Planning process at United Parcel:
Strategy has never been taken carelessly for UPS. Monthly meetings of teams purposely formed to envision the future and assess decisions have always played a large role in UPS’s approach to low cost management and differentiation through quality customer service. The grouping of these approaches creates a common business-level strategy emphasizing quality as consistency. By identifying their location on the value creation border, the objectives of a company can become more clearly defined. It is through such identification that has led UPS to change their mission announcement, further identifying goals and purposes at the organization in their industry and market segments.
As a company that focuses on low cost and quality, it is important for UPS to take serious action towards each of these approaches to differentiation. These actions have transpired into tangible and non-tangible probable outcomes for the company. The company has created their own sets of terms and norms by allowing their company to acclimatize to customer needs while staying within the same parameters outlined by the company. UPS is able to stay ahead of the competition by continually looking into the future. By knowing where they want to be in the future, the managers are able to see if each investment, functional-level strategy, business-level strategy, or technological advancement will help or harm the company. UPS tries to take advantage of all potential technological advancements, staying true to the tradition of the company.
UPS has dedicated their decision method and strategy to low cost and superiority through competence and dependability of service. They do so by focusing on the importance of pricing options, separation, finding the market demand, having a very particular cost structure, and focusing on their particular industry and market competitive structure, which are all important in a successful position at the business level. By identifying their strategy and staying fully dedicated to it, UPS’s actions and strategy is one of immense value. This value is exponential due to the fact that UPS is in a very competitive market. The services offered by UPS are similar to those of FedEx and DHL.
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